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Deutsche Telekom's T-Systems to Cut Up to 10,000 Positions

(Bloomberg) -- Deutsche Telekom AG is eliminating more than a quarter of the positions at its computer-services unit, which has bled money for years.

The T-Systems division will cut as many as 10,000 jobs, of which 6,000 will be in Germany, over the next three years, spokesman Harald Lindlar said Thursday. The tech unit that’s struggling to compete with more agile cloud startups and multinational giants employs about 37,000 people.

The job cuts are meant to save 600 million euros ($698 million) by 2021 so the unit’s new Chief Executive Officer Adel Al-Saleh can reinvest some of the money into “growth areas,” Lindlar said by phone. Deutsche Telekom has identified cybersecurity, its cloud business and internet of things-related services as opportunities to expand.

Al-Saleh joined in January to right T-Systems and focus on profitable contracts. Thursday’s announcement is the first major move for the American software veteran with a track record of turning around troubled businesses.

While T-Systems gives Germany’s biggest phone company access to large multinational clients it can sell other services to, the unit has for years been the company’s problem child. Some of its contracts have proven loss-making, and it has come under pressure as IT services are increasingly moving into the clouds of Amazon.com Inc. and Alphabet Inc.’s Google, where they’re available at a lower cost.

The stiff competition has hurt margins and stifled growth at T-Systems, which has accumulated operating losses of more than 3.2 billion euros since 2012. Deutsche Telekom CEO Tim Hoettges has indicated he wants to see the start of a turnaround this year. A healthy performance at T-Systems is key for a carrier the size of Deutsche Telekom, which seeks to benefit from industries digitizing their factories in Germany and abroad.

Al-Saleh’s past successes include reviving NIS, a U.K.-based company specializing in human resources software. He was brought in as CEO in 2011 by owner KKR and went on to streamline the company’s portfolio, update its strategy and cut costs. He also restructured the business’s debt and brought in Goldman Sachs Group Inc. as an investor in 2016.